types of partners and their rights

types of partners and their rights. partner is the one who has agreed to contribute a certain sum to a partnership business and is prevented by law from taking any active part in the management and administration of the business.

TYPES OF PARTNERS

  • Limited partner: A limited partner is the one who has agreed to contribute a certain sum to a partnership business and is prevented by law from taking any active part in the management and administration of the business.

  • He is liable for debts and obligations of the partnership only up to the amount of capital he has contributed. A limited partner has limited liability.
  •  General partner: A general partner has full power of participating in the conduct and management of the partnership business. He is entitled to take full share in the management of the firm. This kind of partner is liable to the full extent of his estate for the partnership debts, i.e. he has unlimited liability.

  •  Active partner: An active partner takes active part in the management and administration of a partnership business. He contributes to the financing and formation of the business, takes active role in the day-to-day running of the enterprise and is being paid a certain sum salary.

  • Nominal or quasi-partner: A nominal partner contributes only his name to the formation of the business. He neither contribute* capital nor takes part in the management of the firm.

            A nominal partner must be a distinguished personality within the society as his name must surely increase the reputation and possibly the goodwill of the partnership business. This partner will share in the profit or debts of f firm as specified in the Partnership Act of 18 He might be a politician or a successful business man.

  • Sleeping or dormant partner: A dormant partner takes no part in the conduct and management of the partnership business. He will contribute capital and share from the profit but will not engage in the day-to-day running of the enterprise, i.e. no active participation in the firm. A sleeping partner receives no salary but is liable for the debts of the firm. The mere fact that a partner is a dormant one does not exonerate him from liability in the event of wrong decision by the active partners.

         RIGHTS OF PARTNERS

So what are the rights of partners involved in running a partnership business organization

  • The partners are entitled to share from the profits of the partnership business.
  • A partner making advance beyond the| amount of capital which he has agreed to subscribe is entitled to interest of 5%.
  • A partner has the right to act as the age of the business.
  • Every general partner can take part in I management of the partnership.
  • Every partner must have access to the partnership books of accounts.
  • They must be indemnified by the firm in respect of payment made and personal liability incurred by them in the conduct of the business.

            FORMATION OF PARTNERSHIP

A partnership business may be established without formality although the partners have certain unavoidable obligations to third parties; ay make such agreement between themselves in respect of the internal management of the firm.

It is accordingly usual for people into partnership to express their intention partnership agreement known as deed of partnership. Deed of partnership may be defined as agreements, rules and regulations guiding the members of a partnership.

partnership business

The agreement form of a partnership business organization contains the following rules and regulations:

  • The names of the partners.
  • The name of the firm.
  • The nature of the business formed.    
  • The rights and duties of each partner.
  • The proportion in which capital is to be provided and whether interest should be paid on capital.  (8)
  • The signatories on the cheques.
  • The sharing of profits and provision for drawings.
  • Duration of the partnership.   
  • The circumstances which shall dissolve the partnership.
  • The payment of partners’ salaries.     
  • The method of admission of new partners.
  • The objective of the firm.

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